Market review

• Taking cues from the overnight Wall Street performance, Asian key benchmark indices ended positively led by Japan Nikkei 225, which gained 0.28%, marking the highest closing over the past ten years, while Shanghai Composite Index rose 0.18%.

• Meanwhile, the FBM KLCI traded lower, violating below the 1,760 level. However, trading interest was focusing on penny counters and lower liners for the session. Market breadth was neutral and the overall traded volumes stood at 3.18bn. Also, we noticed trading activities were within the O&G and technology sectors.

• US stock markets ended on a bullish note, marking another round of fresh record position after investors digested the FOMC meeting minutes, which most of the officials were having mixed views on the inflation data, resulting in a different comments on the interest rates hike outlook.

Technical view

KLCI to hover between 1,750-1,765

• Following the violation of 1,760 on the KLCI, the MACD Histogram has turned red after a series of green bars in the past week. Also, the RSI has turned mildly lower. With the technical indicators pointing slightly weaker, we think the KLCI may extend its consolidation between the range of 1,750-1,765.

Market outlook

• Following the meeting minutes by the Fed, investors should be focusing on the quarterly results this month in order to gauge the economic outlook over the near to mid term. Should there be any disappointment in the results of financial stocks, it may cap the upside of the Dow near the 23,000 level.

• Over in our local bourse, trading activities amongst the Internet-of-Things stocks should remain active as higher volumes were noticed over the past week. Also, O&G sector may pick up amid firmer crude oil prices. Meanwhile, upside on the KLCI is likely to be capped along 1,770-1,775 amid the absence of fresh catalyst.

• Trading Buy – HIAPTEK. Hiaptek is primarily involved in pipe manufacturing and the trading of general steel products, supplying to multiple of industries including manufacturing, infrastructure, water, power plant, shipbuilding, oil & gas, as well as the construction market. HIAPTEK FY17 operating profit surged 60% to RM170.8m, mainly driven by higher ASPs despite a 6% drop in revenue. However, following a huge RM215m impairment loss (non-cash item) in JCE, HIAPTEK’s net losses expanded 145% to RM103m. After the kitchen sinking exercise in FY17, we expect a turnaround year in FY18. Hiaptek is trading 37% below BVPS of RM0.62.

Source: Hong Leong Investment Bank Research - 12 Oct 2017